Breaking Into Equity Research with No Finance Background (Using Data)
Equity research recruiting is generally less structured when compared to other front office roles. Entry-level on-cycle recruiting at bulge bracket firms (Goldman Sachs, J.P. Morgan, etc.) is skewed towards summer interns who would sign return offers prior to their last day in the summer.
However, off-cycle recruitment is much more common in equity research than investment banking. This provides ample opportunity to break into the industry throughout the year outside of set recruitment deadlines that other jobs may have.
This is because an equity research team's needs change throughout the year depending on things like changes in coverage (picking up new stocks to cover) or as junior-level employees exit to different roles.
As a result, industry specialization is valued extremely highly in equity research. It’s much easier to break into the industry if you can show that you have a relevant and unique skill or perspective on a covered industry either from your education or past jobs.
From the perspective of a hiring manager, it’s much easier to teach someone with a science background how to build financial models than to teach a finance major the core concepts from a technical science degree on the job. If you land an equity research interview, you need to portray your ability to easily learn finance concepts on the job if you don’t know them already, so you're not seen as a training risk after being hired. You can learn the foundations of equity research, modeling, and how to pitch a stock in our course here.
Focus on Specific Teams to Increase Your Chances
Some teams consistently hire industry professionals with no prior finance education or work experience, with the expectation that they’ll be proactive and learn modeling fundamentals on their own.
Some common examples are shown in the table below:
To illustrate this point, we looked at a random sample of 100 equity research professionals on LinkedIn with a science education background. Looking through the lens of university majors, we noticed that there was a significant representation of students with knowledge in something tangential to biology (medicine, biochemistry, pharmacology, immunology, etc.), followed by engineering and math.
In our sample, 54% of equity research professionals with a science background pursued a PhD, while 46% did not. Of the people who had PhDs, the overwhelming majority studied biology, which gave them an advantage in securing jobs covering stocks within the Biotech sector. Some students went on to cover stocks within the Energy sector, likely due to their Chemistry education which would be helpful in understanding and discussing the technical aspects of some companies’ products.
Others with a background in math or engineering were able to use their knowledge to cover stocks within the Technology and Industrials sectors, though those coverage groups have a high representation of people who did not study science in university due to the relatively lower knowledge threshold required to speak well on trends with clients, compared to something more specialized like Biotech.
See the table below for the typical outcomes of candidates with a science education background.
We also looked at a sample of 100 equity research professionals with a finance education background. We noticed a much more even distribution of resultant industry coverage, with only 22% covering Biotech stocks vs. the 82% placement rate within that sector of those with a science background. Some people pursued CFAs to pad their resumes if they came from non-target schools, or if they tried to lateral from smaller firms to bulge brackets.
See the table below for the typical outcomes of candidates with a finance education background.
As there are more opportunities in industry groups outside of Biotech, it would be logical to pursue an education in finance to increase your chances of breaking into the industry. However, having a background in a more technical STEM field could arguably set you apart from other candidates as it would be assumed that you’ve spent time doing more intensive work involving data and research. You can learn all the essential skills to succeed in an equity research job from our course here.
A large part of the job is speaking with and educating investors, and building detailed models that would reasonably predict a company’s future earnings. If you have a background in biology, perhaps your expertise in a specific industry or company would make investors seek you out, or maybe your knowledge about the typical R&D process of a drug can help you dial in more accurate estimates about a pharmaceutical company’s development costs.
Overall, think about how your unique skill set can translate to giving an equity research team an edge in either speaking intelligently with clients, or including unique and relevant insights into their modeling.
Focus Your Networking Efforts
There’s clearly a bias in industry placements reflecting the prior background of employees. Use this to your advantage when you’re focusing your networking and recruitment efforts.
If you didn’t go through business school and missed out on on-cycle recruitment, you should focus on dialing up your networking intensity. Directly speaking with a senior equity research analyst about an opening on their team (for which you are qualified and have a unique relevant skillset) could help you skip the resume drop void. You should aim to speak with 2 people per week in the industry, especially if you have no prior connections or didn’t attend any networking events at your school.